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Fed Chairman Jerome Powell has ended pandemic-era monetary policy.
Julia Nikhinson/Bloomberg
Stocks rose on Thursday, reversing earlier losses, after the Federal Reserve announced on Wednesday that it will begin raising interest rates. Meanwhile, news about talks between Russia and Ukraine has receded.
In the afternoon discussions, the
Dow Jones Industrial Average
increased by 186 points, or 0.6%. the
S&P500
increased by 0.6%, with the
Nasdaq Compound
up 0.5%. On Wednesday, the Dow Jones jumped 1.6%, while the S&P 500 gained more than 2% and the Nasdaq jumped more than 3%.
The rally comes even after the Fed said it was implementing a quarter-percentage-point rate hike and charted its course for a total of seven increases this year and more next year. The Fed is trying to fight soaring inflation, and it seems set to do so at the expense of economic growth.
News from Russia didn’t really help stocks on Thursday. A Russian spokesman said a report of significant progress in talks between the country and Ukraine was “inaccurate”, although talks are still ongoing.
That helped push the price of West Texas Intermediate crude oil up 7% to around $102 a barrel. Markets fear that restrictions imposed by Western countries on Russian oil will limit supply, raise prices and create even more inflation for households.
All things considered, bond market developments continue to raise concerns about inflation and rising short-term interest rates, which would lower economic demand and inflation in the longer term. term. This is why the two-year Treasury yield rose 0.4 percentage points over the past month to 1.93%, while the 10-year yield rose only 0.1 percentage points. at 2.16%.
It’s possible that although the Fed has paved the way for as many as 11 rate hikes over the next few years, the stock market may not believe it. If the bond market signals concerns, the Fed could slow the pace of increases. “The yield differential between the 2-year Treasury note and the 10-year Treasury note is now too close to be comfortable and will likely make the Fed wary of further interest rate hikes,” wrote Louis Navellier, founder of Navellier & Associates.
That’s a recipe for the rapid stock market rally seen in recent days, as investors have already sold stocks en masse and raised funds, according to the Bank of America fund manager survey. With the S&P 500 still down about 9% from its all-time high, “investors may find themselves too underweight and they’re continuing that move,” said Bill Zox, portfolio manager at Brandywine Global. “We evaluated a lot of them.”
Elsewhere, initial weekly jobless claims came in at 214,000, below a forecast of 220,000 and an improvement on the previous week’s result of 229,000.
Overseas, Frankfurt
DAX
fell 0.4%, weighed down by the war in Eastern Europe, while the stock markets were supported in Asia, with the
Hang Seng
Index up 7%.
Markets in China focused on other things. The 7% rise in Hong Kong’s key index follows a 9.1% jump on Wednesday – the best two-day performance since 1998 – after China moved to stimulate the country’s economy and stabilize the stock market. The state intervention comes amid a sharp sell-off that had only accelerated in the past week, before backtracking on news from Beijing.
“When a senior official makes announcements like the one yesterday, things change,” said Jeffrey Halley, analyst at brokerage Oanda. “The Chinese government is drawing a line in the sand on the rout of Chinese equities in the medium to long term, and we should all respect that.”
Here are six stocks in motion on Thursday:
After posting their best daily gains, shares of Chinese tech giants
Ali Baba
(symbol: BABA) and
JD.com
(JD) were lower. After Alibaba soared more than 36% on Wednesday with JD.com up 39%, Alibaba was down 5.1% in the US, with JD.com down 3.9%.
Williams Sonoma
(WSM) rose 3.7% after the company reported earnings or $5.42 per share, beating estimates of $4.82, on sales of $2.5 billion, below expectations of $2.58 billion.
Accenture
(ACN) fell 1.4% after the company reported earnings of $2.54 per share, beating estimates of $2.37 per share, on sales of $15.05 billion, over above expectations of $14.65 billion. The company also raised its full-year earnings forecast.
Ralph Lauren
(RL) gained 3.6% after being upgraded from neutral to overweight at JPMorgan.
CSX
(CSX) added 0.5% after being upgraded to Outperformer from Sector Perform at RBC.
Write to Jack Denton at jack.denton@dowjones.com and Jacob Sonenshine at jacob.sonenshine@barrons.com
